All that glitters might be gold’s volatile price

Tough markets make for buying opportunities—both in equities and that one precious metal so many love to wear and talk about: Gold.

If you’re a buy-when-there-is-blood-in-the-street kind of value investor, perhaps you’ve made a list of the securities you wished you had purchased earlier this year and now see their prices close to buy time. Take gold, for instance.

Tobina Kahn, vice president of the House of Kahn Estate Jewelers, (her parents own The House of Kahn in Palm Beach) thinks that the “sky is the limit” when it comes to the price of gold. Which, incidentally, lost 6 percent of its value in May and closed at roughly $1620 on June 1, is down about 18 percent since it peaked in September (2011) at $1916 per ounce and now (July 20, 2012) is trading around $1584.

But Kahn is a gold bull and sees individuals choosing this precious metal over other investments because it’s a valuable asset with a price promise sometime in the future that she thinks will be considerably higher than it is today.

But who knows?

One thing we do know, and Kahn will agree with, is that the price of gold is volatile. Always has been. Always will be.

This week the World Gold Council released its second quarter commentary about this glittery metal. Two points made by the council were that gold prices had declined against most currencies, with the exception of the euro, during that time frame. And even so, given the pressure and financial challenges of stocks, bonds, currencies etc, they feel:” Its (gold’s) liquidity and hedging characteristics has made gold an attractive vehicle for long-term wealth preservation.”

The folks over at Merrill Lynch have gold dust in their eyes, too.

Francisco Blanch, head of Global Commodity & Multi-Asset Strategy Research at Merrill, expects the Fed will be forced to do some quantatative easing in September. If that happens he sees the price of gold heading right where Kahn does—to $2000.

One thing we do know about gold is that as an investment most pros say it ought not be shunned. Also, that a portfolio filled with only gold might be akin to fool’s gold as too much invested in any one thing, comes with a hefty risk price.That’s why you’ll typically hear it suggested that individuals have somewhere in the neighborhood of 5 to 15 percent of their total assets invested in this precious metal. Not counting, of course, the value of what you’re wearing on your fingers, wrists, ears, around your neck or what’s in your jewelry box or bank vault.

Before making any investment moves, though, keep in mind that the drop in gold’s value has been due to weakening demand in places like India and China and the economic turmoil in the euro zone. No one knows for sure when all of that turmoil is going to settle down or if the Fed will really do any more easing in the fall.

That said, for your review, here’s a graph from the World Gold Council on the how gold’s price changed during the second quarter of 2012: